The overeducation trap: household wealth and education-occupation mismatch among college graduates in the Philippines

This paper examines the socioeconomic gradient in education-occupation mismatch among Filipino college graduates. Using nationally representative FIES-LFS data covering 198,343 employed graduates from 2009–2023, the analysis shows that graduates from the poorest income decile face a 79.3% mismatch rate compared to 30.7% for the richest decile, a 48.6 percentage point gap. Probit estimates show a one-decile increase in household income is associated with a 5.17 percentage point decrease in mismatch probability. Results are robust across specifications. Analysis of occupation group composition reveals that poor graduates are disproportionately absorbed into service/sales occupations (26.3%) and elementary occupations (17.9%), consistent with the structural absorption of over-educated workers into low-skill services in the Philippines. A formal interaction test confirms the income gradient has statistically significantly intensified in the post-2018 period (χ2(1)=64.08, p<0.001). The findings are consistent with the interpretation that poor graduates face tighter job-search constraints, creating an ‘overeducation trap’ that undermines returns to education, though this mechanism is not directly observed in the data.